Detroit to invest $2.5 million in golf courses as future remains uncertain

Previous manager Vargo and the city engaged in legal dispute after contract change

Lucas Valone for Crain's Detroit Business

Improvements to the clubhouse at Rackham Golf Course are planned as part of the city's $2 million investment plan for its golf courses.

The city of Detroit is planning to invest $2.5 million in its three golf courses over the next two years amid a legal battle with its previous contractor and uncertainty over the fate of the courses.

Sorely needed capital improvements at Rouge Park, Chandler Park and Rackham golf courses would be the largest city course investment made in several years. It would include the basics: fixing the fencing, repairing drainage, patching up cart paths and sidewalks, getting the bathrooms functioning, etc., said Brad Dick, director of the city's General Services department.

As for Palmer Park, the city is throwing in the towel at the north end course, which opened in 1927, following years of neglect and revenue declines. It was open briefly as a nine-hole course after overgrowth claimed the back side, and there were talks of turning it into a driving range. At this point, the city is planning to just maintain it as a recreation space.

"It hasn't made money in quite some time, and we didn't think it was worth investing money into it," Dick said. "We're post-bankruptcy and looking to be fiscally responsible."

Rackham's future is unclear. The popular course, sprawled across land in Huntington Woods and Royal Oak near the Detroit Zoo, is the prized asset and revenue driver among the courses. Mayor Mike Duggan wants it sold but that move faces much opposition from City Council and many residents. For now, "the city doesn't have an offer on it, and it's not for sale," Dick said.

In March, it was unclear if the courses would even open. The city eventually approved a new two-year contract with North Carolina-based Signet Golf Associates II, ending eight years of management by Oakland Township-based Vargo Golf Co. Vargo called the bid process a sham and expressed doubt over Signet's ability to run the courses.

Legal disputes

Vargo and the city of Detroit are now engaged in a legal dispute stemming from the contract loss. The city filed a complaint last month with 3rd Circuit Court in Wayne County, alleging that after Vargo's contract ended, the company took city property from the courses, including tee signs, irrigation systems, ball washers, bag racks, range mats and balls, and wooden doors.

It also claims Vargo is on the hook for outstanding electricity and property maintenance bills and that it took proceeds from the city by selling season passes for the 2018-19 season and taking revenue for its personal use, according to the complaint.

A judge earlier this month ordered Vargo to return tee signs and irrigation systems — including lines, keys, radios and as-builts — from the courses as well as wooden doors from Rackham. If the city does not prove it owns the property, a judgment will be entered in favor of Vargo, according to the order.

Robert Vargo, owner of Vargo Golf Co., said he turned over tee signs to the city two weeks ago but that he owns the items after buying them from the previous management company.

"We'll be back in court," Vargo said. "I'm not gonna be bullied by the city."

Kurt Nagl/Crain's Detroit Business

Destroyed fencing separating the freeway from Chandler Park Golf Course on Detroit's east side is targeted for repair as part of the city's $2 million improvement plan for its golf courses. Fencing around the course was recently repaired and cleared on the neighborhood side to increase its visibility to the community.

Dick said any delay to the start of the golf season was due more to unseasonable weather than management complexities.

With warmer weather attracting patrons, and league play in full swing, many golfers are feeling the absence of an important amenity at Rouge and Chandler: alcohol. Vargo took the liquor license when it left and Signet is in the process of getting approval to sell alcohol at the courses. Dick said it hopes to receive the license in early to mid-June.

It's another headache for cash-strapped courses struggling to keep a customer base that has been steadily shrinking. As a general indication, the number of players nationwide dropped from 30 million in 2002 to just less than 21 million in 2016, according to golf business analysis firm Pellucid Corp.

Under a deal cut with Vargo, Detroit saw just $46,000 in revenue from the courses in 2016 after the city settled a $442,000 water bill with the course manager. Revenue was $104,000 in 2015.

Vargo had paid the city a rental fee to operate the courses, kept nearly all the revenue and was responsible for investing in and maintaining the courses under its contract. In its two-year contract with Signet, the city pays the management company $90,000 a year and 20 percent of course revenue above a baseline budget amount, Dick said. The city is responsible for investing in the courses.

What's needed

While the city's plan to funnel money into the courses — a move requiring City Council approval, which could come in the next couple weeks — is a promising sign for the courses' future, it falls short of what is needed. A study conducted by the National Golf Association found they require $15 million in improvements.

As for this season, goals are centered on engaging the neighborhoods and making small improvements to enhance the playability of the courses, said John Wait, president of Georgia-based Sirius Golf Advisors, which is working with Signet to run the courses.

Among improvements planned for this season are implementing a resident rate at courses, expanding the First Tee program, introducing programs for junior golfers and golfers with disabilities, offering free or low-cost club rentals and reducing the cost barriers to the game, Wait said in an open letter leading up to City Council's vote on the course management contract. The group is also aiming to market the courses more uniformly under the brand Golf Detroit.

Signet also won earlier this year the contract to manage Belle Isle's golf complex for the state, which operates the park. The driving range and short-game practice area are open, but the short course is still closed as crews work to get it up to snuff, Wait said, adding that it should be open for play in about three weeks.

Kickoff events

In partnership with the city and Chandler Park Conservancy, the city's courses are hosting Putt, Chip & Drive kickoff events that will include food and entertainment. The first event takes place 11 a.m.-3 p.m. Saturday at Chandler Park Golf Course; the second is June 9 during the same time at Rouge Park Golf Course. It is free for golfers and nongolfers and will include a petting zoo, pony rides, entertainment, games and food trucks. There will also be a chance to win $10,000 in a golf simulator hole-in-one competition and $28,000 worth of prizes in other games.

"What we are trying to do is reach out to more demographics — women and minorities have long been ignored by the golf industry," Wait said. "We feel that is part of the responsibility of a municipally-owned facility, is to look beyond yourself and reach out to the community."